The monopsonist's marginal factor (resource) cost curve for labor is:

• A. Above the labor supply curve and rises faster than the wage rate
• B. Horizontal and equal to the market wage rate
• C. Below the labor supply curve and rises slower than the wage rate
• D. Identical to the labor supply curve

Answer: (A)

Verified step by step guidance

1. Understand the concept of a monopsony in the labor market: A monopsonist is a single buyer of labor, which means it faces the entire labor supply curve when deciding how many workers to hire.
2. Recall that the labor supply curve shows the relationship between the wage rate and the quantity of labor supplied. For a monopsonist, the wage rate must increase to attract additional workers, so the supply curve is upward sloping.
3. Define the Marginal Factor Cost (MFC) of labor: It is the additional cost to the firm of hiring one more unit of labor. Because the monopsonist must raise the wage rate to hire an additional worker, it pays the higher wage not only to the new worker but also to all previously hired workers.
4. Recognize that the MFC curve lies above the labor supply curve because the cost of hiring an additional worker is more than just the wage paid to that worker; it includes the increased wage paid to all existing workers. This causes the MFC to rise faster than the wage rate.
5. Conclude that the MFC curve is above the labor supply curve and rises faster than the wage rate, which distinguishes a monopsonist's labor market from a perfectly competitive labor market where the MFC equals the wage rate.